http://www.investors.com/editorial/issues.asp?v=5/23A Fair Deal For All
INVESTOR'S BUSINESS DAILY
May 23 2003
Fiscal Policy: It would seem that tax-cut opponents would be somewhat mollified that the White House will get less than half the relief it initially proposed. But that's not the way it works in Washington.
Though the administration wanted a $726 billion tax cut over 10 years, President Bush is willing — eager, even — to sign the $350 billion cut that Congress has agreed to. That's quite a compromise, not only for Bush, but also for House Republican leaders who wanted the cuts to be bigger.
But they're content to get something and to get it now, as are we. Stimulus is needed immediately, and we'll live with the sunset provisions on the dividend tax cut and the package's smaller size to get the economy going as soon as possible.
For some, the deal, hashed out Wednesday night, brought relief. For others, it was a signal to begin playing the envy card of politics. Senate Democratic Leader Tom Daschle, who is practiced at the art, was quick to gripe that the tax cut "gives away billions to those who need it least and does very little for those who need it most."
That's a rather inflammatory statement that utterly fails to consider the impact of the plan's child tax credit. Families making less than $110,000 will be able to take a $1,000 per-child credit rather than the $600 credit under current law. That's $800 in meaningful relief that any struggling family of four will welcome.
If anyone complains about fairness, high-income earners should. Under the plan, tax cuts for the lowest-income Americans are larger as a share of what they pay than those for the richest taxpayers.
The Tax Foundation figures the tax cut for a two-child couple making $40,000 a year will be $1,133, leaving the family to pay just $45 in taxes — down from $1,178 currently. That's a 96% cut. Meanwhile, a family of four earning $200,000 a year gets a $3,078 tax cut — but it still owes $32,073 in taxes. That's a 9% cut.
Relief for low-income earners is more generous when compared with incomes as well. That $200,000 family's tax cut is only 1.5% of its income. The $40,000 family's tax cut is 2.8% of its income.
Critics will still point out the gaps in dollar amounts — $3,078 to $1,133 — but that's not a compelling argument. Here's why:
Two years ago, Daschle misleadingly, and mistakenly, criticized Bush's tax cut as unfair. The rich, he said, would get a $46,000 tax cut, enough to buy a new Lexus; the "typical working person" would get a $227 cut, enough to buy a muffler.
While dramatic, Daschle's stunt made little sense. Yes, the richest Americans will get the biggest relief in dollar amounts. But those who make only $46,000 a year — and there are many who do — simply aren't going to get a $46,000 tax cut. The wealthiest pay the biggest tax bills and so get more relief, at least in dollars.
Does that mean the wealthy shouldn't have their taxes cut? No. Constitutional fairness demands that their taxes are reduced too. So does the need for stimulus. It is their investments that provide jobs and boost economic growth.
This plan is being called the third largest tax cut in history. Yet it would have been bigger and had fewer sunset provisions except for a few GOP senators.
That's fixable, though. There's time to add more Republicans and tax-cutting Democrats to the Senate so that in a couple of years the George Voinoviches, Lincoln Chafees and Olympia Snowes won't have the deal-breaking power they have now. Then the relief can, and should, be made permanent.
